Shares of retail coffee chain Coffee Day surged 20% in intraday trade on Wednesday after the National Company Law Appellate Tribunal (NCLAT) quashed insolvency proceedings against its subsidiary, Coffee Day Global Ltd (CDGL). The move comes after CDGL and its financial creditor IndusInd Bank reached a settlement over outstanding dues.
Earlier on Wednesday, counsel representing both CDGL and IndusInd Bank informed the Chennai bench of NCLAT about the settlement and requested permission to withdraw insolvency litigations. A two-member bench, comprising Justice M Venugopal and Shreesha Merla, took their submissions into account and set aside the order admitting CDGL to insolvency.
The development follows a dispute that began in July when the Bengaluru bench of the National Company Law Tribunal (NCLT) passed an order over a plea filed by IndusInd Bank. The bank, which is a financial creditor of CDGL, claimed dues of Rs 94 crore. In response, CDGL moved to NCLAT against the NCLT order and had already obtained a stay in August.
Aside from this legal victory, Coffee Day's stock also experienced a boost. Technical analysts noted that the stock broke out of the descending channel pattern on weekly charts with above-average volume. Last week, the price retraced back towards breakout levels with a gap-down opening. Meanwhile, shares of IndusInd Bank also saw an increase, trading over 1% higher at Rs 1,447.10 on NSE.
It is worth noting that Coffee Day's parent firm reported in its FY23 annual report that CDGL owns 469 cafes in 154 cities and 268 CCD Value Express kiosks. Furthermore, it operates 48,788 vending machines that dispense coffee in corporate workplaces and hotels under its brand.
However, the company faces another legal challenge as IDBI Trusteeship Services filed a fresh application before NCLT against Coffee Day for an alleged default of Rs 228 crore (approx. $27.5 crore). The company stated it is seeking appropriate legal advice and will take all necessary steps to protect its interest in this matter.
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